What is Money?

Best Definition of Money: Money is the accounting of transferable incomplete transactions.

In the 1990s here at Bob Enyart Live, I wrongly claimed that justice required a return to the gold standard, whereby currency was formerly backed by reserves of precious metals. For a few decades after 1882 in the U.S., the bearer of a $20 bill (i.e., a gold certificate) could return it to a bank and receive an amount of gold approximating that value. After studying and thinking about money for years, interacting with one of the world's leading consultants on monetary policy, reading economic texts such as Ludwig von Mises' Theory of Money and Credit, and reflecting on the Bible, I now affirm that while metals can be used as money, money itself is not gold or silver. And money is even more than simply a medium of exchange. Rather, money is more like a transferable IOU. And unless an IOU is fulfilled, it represents an incomplete transaction. Therefore, KGOV considers the most accurate definition of money to be:

Money is the accounting of transferable incomplete transactions.

If in fact, that is what money actually is, then as those transactions are completed, the actual money based on those transactions, disappears. This article will test that idea.

currencyMetal, Paper, Web: Money is not a thing. It is an accounting system. Back when technology did not exist to support more effective and lower-cost accounting procedures, the ancient Israelites and other cultures reasonably implemented metal-based money. Since no one can create gold (well, at least not until recently), it was difficult to counterfeit money without the theft being detected (like by biting a coin, weighing it, etc.). Later, by the time of Christ, a businessman could cash a check in Ephesus with the funds drawn on his bank in Rome, a thousand miles away. Later still, the printing press enabled the widespread convenience of paper currency. Today, the Internet enables the convenience of online transactions. While all forms of money come with risk of fraud, these modern monetary conveniences provide extraordinary benefit to billions of people.

Programming Note: On a December 2010 show and  again in September 2015, Bob Enyart aired programs to answer the question, What is Money?, talking through the ideas in this article. That prompted a lively discussion to which you can add your thoughts on a TheologyOnline.com thread in the BEL Forum.

Here's What Makes the Economy Function: God commands men to "serve one another" (Galatians 5:13). If one man is alone for life on a desert island, there could be no "economy". (Even money itself would become meaningless, for money must be transferable.) If two or more people were shipwrecked on that island, and they refused to work with one another, and stayed isolated, they would not build an economy. On the other hand, as they attempted to survive, or even thrive, if they did begin providing goods and services to one another, then they would gradually build an economy. An economy grows as human beings increasingly serve one another. And an economy will grow most quickly if these men are free, for the Bible says that, "liberty" provides the "opportunity... [to] serve one another." However, if they began to keep to themselves, and stopped trading goods and services, their economy would sputter out and die. (And if all economic cooperation ceased permanently, any money that each had collected would lose its monetary value.) So an economy thrives when men serve one another.

(Economist Walter Williams has a truly great mind. So with great care we broadcast two caveats to his otherwise brilliant remarks on the above video, regarding his loose words about the "benefit" that comes to some from government economic intervention, and his praise of the U.S. Constitution for its alleged support of limited government.)

Money Is Properly Created By Fiat: If these shipwrecked men washed ashore on a deserted island that had no gold, still, they actually would create money, "by fiat," as they entered into agreements that created something like transferable IOUs. Thus in any nation, every time someone buys a car or a home, etc., on credit, they thereby commit themselves to years of hard work (or at least, to the obligation to pay off the loan). That process, and the commitment itself, actually brings more money into existence.

Fractional Banking Is Justifiable: Understanding how money actually functions justifies the modern world's fractional banking system, whereby lenders bring money into existence when making loans, and they expunge the principal as it is repaid. (See fractional banking at Mises.org, Bob's Post 169 at TOL, Post 15's 2020 Updates, etc.).

Illustrating Why Fractional Banking is Justifiable: A 19-year-old is now sick and tired of the last year he has spent in the house playing video games and so he goes out and buys a junker car on credit, committing himself to paying $100 a month for a year. Then he is suddenly interested in doing work for his neighbors, so he paints one guy's garage, and mows another's lawn, and repairs someone else's fence, and so on until the whole neighborhood looks better. All that economic activity was precipitated, and somewhat predicted, by his commitment to repay his car loan. Understanding the time value of money helps to calculate future value. Similarly, understanding a borrower's commitment to repay a loan is a factor in estimating the level of future economic activity. So when a bank loans out funds that it does not have, as is done with fractional banking, it is bringing money into existence. (That is, the bank makes an accounting entry for a transferable, incomplete transaction). Doing so as described here shows how and why this can be done responsibly and justly. And when a loan payment is made, a portion of the overall transaction is now complete, and so while the bank keeps the interest that it has collected, it then expunges the money that it created in the loan.

Expunging Returned Principle: The lender expunges the returned principle that had been created by fiat, which is consistent with our definition, that money is the accounting of transferable incomplete transactions.

The Bible and the Fed: Regarding the biblical view of debt, God regulated Israel's system of debt, showing that scripturally, debt is not inherently immoral, but can be used for good or bad, like fire. As to the particulars of America's Federal Reserve System, the Fed should be audited (it never is), and other methods of implementing money may surpass the benefit of America's current system. The proper way to judge a monetary standard is to evaluate its effectiveness (accountability) and efficiency (low cost).

Gold Is Not The Gold Standard In Money: Requiring a gold standard inflates the value of gold, by fiat. The fiat is the government declaration requiring a gold standard. That fiat requirement thereby artificially, that is, by government decree, inflates the value of gold. In this way America ciphered manufactured goods from Europe in return for our fiat-inflated gold; we then demineralized our money. By merely then going off the gold standard, from a distance and without cracking a safe, we devalued England's vaults.

The Gold Standard Arbitrarily Redistributes Wealth: As a result there is an unnecessary redistribution of wealth by which various governments transfer wealth to other countries that happen to find gold within their borders. Conversely, a government puts unnecessary hardship on citizens living in lands that lack gold deposits.

Gold Does Not Have Intrinsic Value: Gold does not have intrinsic value but as with all valued items, its worth lies in the eye of the beholder. A wealthy nation dying of thirst would trade its gold for water. Even gold dealers who criticize modern currencies still value dollar bills more highly than their inventory of gold. As Mises, an Austrian economist, wrote:

Each party attaches a higher value to the good he receives than to that he gives away. The exchange ratio, the price, is not the product of an equality of valuation, but, on the contrary, the product of a discrepancy in valuation. -Ludwig von Mises, Human Action, 1949 (1998 edition) p. 328

Gold Is Not For Hiding: Basing a nation's currency on gold results in building Fort Knox-like fortresses, hidden from view, and filling them up with gold to back the certificates that are issued. God's Criminal Justice SystemBut God did not create gold to be dug up and then forever buried again, stored away from sight in underground vaults, which is an inefficient and extremely expensive way of implementing an accounting system, robbing that gold from its practical uses for technology and beauty.

Bob Enyart

2016 Update: The pending vote in Switzerland to prohibit commercial banks from creating money, if "successful", would severly harm the Swiss economy and therefore will probably pass.

Also: If you enjoyed this article, you might also enjoy:
- BEL's What makes the economy go?
Bob's DVD The Trouble with Lawyers
- Our 
KGOV Political Spectrums chart and program
- Listening to Bob's seminar: God's Criminal Justice System

- Bob interacts with a fellow from the UK's Adam Smith Institute, Tim Worstall, at Forbes 
- See kgov.com/math#mises for insights from "thought experiments" and for quotes and observations on von Mises' work Human Action see kgov.com/mises
 - Watching Bob's DVD God and the Death Penalty: New Testament Support for Capital Punishment
 - Or just browsing the Department of Government in the KGOV Store.

* Select BEL Definitions & Etymologies: Among those definitions for common terms that Bob Enyart has posited clarifications:
- God: The eternal Creator of the universe who is living, personal, relational, good, and loving.
- Time: The dimension of change; the beginningless, endless, present, continuous, invariable, irreversible future-to-past, non-physical dimension of change.
- Will: The ability to decide. (There are also instances of the exercise of such, which are then also called, "will".)
- Conservative: A Republican trying to save a social program started by a liberal (i.e., "pre-existing conditions", social security, government schools, etc.). A true conservative is somone who advocates for government use of Five of the Ten Commandments as the foundation for its justice system.
Definition of a conservative- Bias: A loyalty (for one's team, etc.) or a false belief that one may draw unreliable conclusions from. Usage example: Flat earthers are but God is not biased in understanding how the solar system functions.
- Knowledge: (human) Awareness of truth. Ex. He has much knowledge.
- Knowledge: (in books) Record of truth. Ex. The library stacks contain much knowledge.
- Know: (verb) to possess knowledge. Ex: "You can think whatever you want, but you can only know the truth." -Zane Mackler
- Miracle: an event that supersedes natural or spiritual law.
- Multiverse: A measurement tool. Ex. "The multiverse is a yardstick used to measure the strength of the fine tuning argument for God's existence. The speed of its acceptance measures atheist desperation."
- Terrorism: Violent crime committed to influence public policy.
- Ish: the Hebrew word for man. Words in its etymology mean likeness, of, native, nativity.
  : man, made in God's likeness (Hebrew ish)
  : woman, made in man's likeness (Hebrew isha)
  : made "out of man" (Hebrew meish)
  : adjective-forming element, English (of or like England),
    girlish, childish, selfish, etc.
  : Nativity, God incarnated in man's likeness
- Feminism: The belief that a woman is worthless unless she is like a man.
- Money: (from above) The accounting of transferable incomplete transactions.
- Forensics: Historical science; investigation of the past whether criminal or not.
- Planet: a massive body in space created to orbit the Sun or any other star.
[Pluto was correctly demoted. Often, knowledge of the origin of a thing, including planet, living "kinds", igneous, metamorphic, and sedimentary rock, person, etc., is needed to correctly define it.]
- Savant
1a) a person who can access some of the originally-created, extraordinary capabilities of the mind and the brain which, because of sin, are now mostly latent
1b) a person with a physiological break in the barrier that formed after Man's Fall, that break opening partial access through the barricade designed to block access to our greatest intellectual potential.
Definition of Unconstitutional: example from Obamacare- Rock: etymology -- God raqa the raqia creating the crust of the Earth
- a and ia: etymology -- place names end in a and ia because God raqa the raqia to give mankind the firmament (terra firma) to live on the face of the Earth, like these 128 geographical regions and consider also places like IraqRaqqa, and Africa
- Amen: etymology -- to all of Joseph's words Pharaoh said, "according unto thy word", that is, "so be it". The powerful archaeological patterns of evidence for the Exodus, based on Dr. David Rohl's New Chronology, begins with Joseph's pharaoh Amenemhat III. The ultimate etymology of the ancient Latin, Greek, and Hebrew term Amen, (and the Hebrew verb aman) likely comes from the abbreviated name of Joseph's Pharaoh Amenemhat III.
- Plant: A living biological organism having a body but not a soul or a spirit, with most being multicellular and capable of photosynthesis.
- Animal: A multicellular biological organism having a body and soul but not a spirit, with specialized sense organs and voluntary movement; excludes humans.
- Mammal: A warm-blooded vertebrate animal with hair or fur, females that secrete milk, and, except for the platypus and spiny anteater, the birth of live young; excludes humans.
- Animal Kingdom: The animals of the world collectively, excluding insects and fish (which are more likened to biological robots than to volitional organisms).
- Human being: A person, made in God's image and likeness, with body, soul and spirit.
- Omniscience: God knowing everything knowable that He wants to know.
- Omnispresence: God being everywhere that He wants to be.
- Omnipotence: God having all power except for that which He has delegated.
- Immutability: God being unable both to change morally and to remain our Holy God.
- Impeccabillity: God being unable both to sin and to remain our Holy God.
- Impassibility: God being in control of His passions.
- Plant: A biological organism that synthesizes nutrients in its leaves by photosynthesis (possessing a body but neither a soul or spirit).
- Crime: Click for witty definitions of legal terms
If you think we should add some other definition used on BEL sometime over the last quarter century, please email your suggestion to Bob@kgov.com. Thanks!  -The KGOV Crew